Economic data was highlighted by another decent employment report, as well as gains in the ISM manufacturing and non-manufacturing indexes.

U.S. equity markets were stronger on the week as economic results outweighed trade/tariff worries; foreign stocks were mixed to flattish on the week. Bonds fared decently with a minor decline in interest rates. Commodities fell slightly, with lower metals prices being more meaningful than a little-changed price of oil.

In a lower volume, holiday-interrupted week, U.S. stocks gained in keeping with stronger economic data, including continued-expansionary manufacturing numbers and a solid jobs report on Friday. This positive news offset some concerns over passing a trade deadline, which put tariffs into place for certain Chinese goods by the end of the week. It appears markets may have grown increasingly numb to trade issues, or perceive that a negotiated fix is still in the works behind the scenes. From a sector standpoint, healthcare and tech led the way, followed by utilities; energy slipped as the only sector performing in the negative during the week.

While tariff talk and implementation hasn’t been enough to boost volatility sharply in recent weeks, earnings results for Q2 will be coming out over the next few weeks, which always tend to raise investor interest. Current expectations for earnings are +20% on a year-over-year basis, with +8% revenue growth, although a greater focus could well be turned to individual company narrative and projections for upcoming quarters we proceed later into the business cycle. The recent soft patch in global growth as well as perceptions of company strategy in light of trade issues (as in putting a damper on the slow trend in increasing capex, etc.) will likely be key topics of focus for company management discussions. There’s no disputing that conditions have been very good—the question becomes ‘how long will it last?’

Foreign stocks in developed markets gained slightly, with positive returns in Europe (for sectors not involving U.S. trade) offsetting losses in Japan. Emerging markets continued to fall back, with near-5% declines in China, as manufacturing numbers declined and off and fears of the intensifying tariff war punishing equities there have manifested to a far greater degree than in the U.S.—ratifying the belief that China ‘has more to lose’ in a trade war, according to some economists, due to a greater reliance the U.S. as a Chinese export destination than China is as a U.S. import source. Other emerging Asian nations have been hit hard as well, including Korea, Indonesia and Malaysia. On the other hand, Mexico experienced a sharp boost following the election of a left-oriented president in the midst of hopes to crack down on corruption and drug violence as well as continue reforms in movements towards greater privatization.

U.S. bonds gained slightly as interest rates pulled back by a few basis points along the yield curve. Investment-grade credit outperformed governments as spreads contracted, and high yield and bank loans both outperformed conventional bond indexes. While foreign developed market debt performed similarly to domestic bonds, emerging market bonds ended as the best-performing area, with tighter credit spreads and a decline in the dollar during the week—bucking their trend of recent weakness. Emerging market bonds continue to fall under a cloud of greater uncertainty should trade tensions escalate and/or the soft patch in global growth begin to gain momentum on the downside. For all the success stories in the EM debt world, with stronger fundamentals, better central bank independence and a lesser reliance on U.S. dollar-based funding sources, as in decades of old, there are plenty of vulnerabilities in both economic concentration and political wildcards.

Real estate in the U.S. and Europe gained ground, in line with broader equities, as interest rates continued to temper, while Asian REITs experienced minimal gains. Defensive healthcare and rate-sensitive mortgage REITs outperformed, but all segments saw gains. After being written off as rates started to tick up, the past quarter rewarded value-seekers in real estate with among the best returns of any asset class—as fundamentals remain solid.

Commodities lost ground during the week, mostly due to a decline in industrial metals and natural gas. Crude oil bounced around within a tight range during the week, ending slightly negative at just under $74/barrel, as promises from Saudi Arabia to increase production remained offset by production losses elsewhere in the globe, including pressure on nations to avoid Iranian oil.

The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.